When people need money for debt consolidation, to pay large expenses, or for home remodeling and home improvement, they typically apply for a second mortgage or a home equity loan rather than taking out a traditional bank loan. Home equity loans (also known as HELOANS) and home equity lines of credit (HELOCs) are the two primary types of second mortgages. HELOANS typically have a fixed interest rate, while HELOCs typically have an adjustable mortgage rate (HELOCs). Which one you go with is determined by your requirements, but the application and verification steps are the same for both.
Your application for second mortgage will go through with as few hiccups as possible if you follow these nine tips:
- Before committing to a second mortgage, evaluate your alternatives, such as mortgage refinancing and other loan options, to see which offers the most favorable terms.
- Be certain that you can explain the objective of the loan to the lender. Your response is considered while deciding whether or not to approve.
- Check your credit report for any inaccuracies and obtain your FICO scores (myfico.com/12), as lenders will look at your FICO score to determine the interest rates on any loans you take out. If you want more information on how to clean up your credit, check out the article “How to Improve Your Credit Score.”
- Evaluate the pros and cons of the various home equity loan options. Have a conversation with your broker or lender about the available loan programs, and work together to locate the financing option that best suits your needs. Obtaining favorable interest rates is also not a terrible plan of action.
- When you apply for a loan, your lender will give you a mortgage checklist. This checklist will include a list of the documents you need to close the loan, including the following:
- A copy of the property’s title deed
- Recent tax appraisal.
- Your most recent two years’ worth of W-2 forms, tax returns, and a pay stub, or your most recent two years’ worth of tax returns if you are self-employed. It is imperative that all schedules be included.
- Documentation demonstrating that you have a stable source of income, such as alimony, child support, disability payments, a lawsuit settlement, an inheritance, or another source of income
- Copies of your most recent three to six months’ bank statements.
- A complete inventory of all active credit accounts (account numbers, payment amounts, and balances).
- Your current mortgage statements.
- Information about homeowner’s insurance (name, account number, and agent phone number).
- If you choose to fax the documentation from the checklist rather than mailing it. The loan process will move along more quickly.
- If you do not complete your loan application. It may cause a delay in the approval process and the loan’s closing.
- Watch out for unfavorable loan terms.
- Suppose the lender encourages you to falsify your application to get the loan.
- Urges you to borrow more than you need.
- Pushes you into unrealistic payment terms.
- Shows up at closing with a different loan product than you agreed to.
- Asks you to sign blank forms, or
- Denies you copies of signed documents.
- 9.In that case, the Federal Trade Commission (FTC) warns that you may be signing into trouble. If the lender encourages you to falsify your application to get the loan. Or urges you to borrow more than you need.
Has a lender declined to provide you with a mortgage after you submitted an application? In order to learn what steps you need to take. In order to get approval for a second mortgage loan in the future.
You should inquire as to the reason why the application was denied. There are times when paying down a few credit cards can boost your credit score just enough to make it possible for you to qualify.
When people need money for debt consolidation, to pay significant expenses, or for home remodelling and home improvement. They typically apply for a second mortgage or a home equity loan rather than taking out a traditional bank loan. The application and approval process is comparable for both types of mortgage loans. But the type of loan you choose to get depends on the needs you have. Your application for a loan will proceed with as few hiccups as possible if you follow these nine tips.
Think about the second mortgage terms. Including whether or not there is an early payoff penalty and how much the interest rate and closing costs will be.